5.7. Implications of Project-Based Activities for Countries with and without
Assigned Amounts of Emissions

All of the major issues-project permanence, additionality, and potential leakage
and risks-present different implications for countries with national assigned
amounts than for countries without assigned amounts. Some of these issues also
show specific characteristics by project type (Table 5-10).
The implications for carbon accounting, as well as associated socioeconomic
and capacity-building components, are also different depending on whether the
countries currently have or do not have national assigned amounts (Table
5-10).

The fate of GHG benefits when the project ends, the risks associated with projects,
leakage, and additionality are all major issues for countries without national
assigned amounts-particularly for emissions avoidance and carbon sequestration
projects-because these countries are not required to capture project activities
in national greenhouse gas inventories. For the same reasons, the choice of
accounting methods and the control of leakage are also critical. This last issue
may be addressed voluntarily and reported on national communications (Table
5-10).

For countries with assigned amounts, project duration is important if the project
does not fall under Articles 3.3 or 3.4, if liability for post-project period
emissions is not clear, or if the commitment periods are not contiguous. Determination
of adequate baselines and establishment of project additionality are required
for projects that fall under Article 6 (and perhaps for projects falling under
Article 12). Concerns regarding methods for GHG accounting at the project level
are not as critical because all countries-including those with assigned amounts-are
required to prepare a national GHG inventory. Double-counting could be an issue,
however, if project activities cannot be captured in national inventories. Potential
transnational leakage between countries with and without assigned amounts is
important to consider because such leakage is not captured by the emissions
limitation of Annex I countries (Gustavsson et al., 1999).

Table 5-10: Key implications of LULUCF projects
for countries with and without national assigned amounts.

Technical Issue

Countries with National Assigned Amounts

Countries without National Assigned Amounts

Permanence and risks (fate of carbon at end of project cycle)

Fate is not an issue if on Article 3.3 Kyoto lands, but fate is an issue
if project is not on Article 3.3 or 3.4 lands. Article 3.4 activities (if
projects): Fate is not an issue, if commitment periods are contiguous.

Fate is an issue for emissions avoidance and carbon sequestration projects
because the country has no assigned amounts or binding baseline, and project
and product lifetimes are relatively short.

Baselines and additionality

Not an issue under Article 3.3. Under Article 3.4, depending on the accounting
system, it could be an issue. Under Article 6, establishing baselines and
additionality is a requirement.

Major issue for all categories of projects. Required under Article 12.
Approaches still being tested.

Leakage of GHGs across project boundary

Minor issue because leakage should be picked up in national GHG accounting.
Potential transnational leakage (e.g., if projects change net C stocks and
wood imports from non-Annex I countries increase).

Leakage is a major issue for emission avoidance and sequestration projects,
but not as important for substitution projects. Leakage control would be
useful, but without a baseline or assigned amount, a country need not account
for it. Might be voluntarily counted in a national communication.

Accounting
- Double-counting of GHG benefits

Only an issue if project cannot be identified and separately tracked in
national baseline and accounting.

Not an issue because only projects are counted.

- Accounting methods

Minor issue because of national assigned amounts.

Major issue for emission avoidance and sequestration projects. Important
to count both carbon credits and debits, or to establish value of delayed
emissions.

Associated impacts
- Sustainable development

A general goal stated in Article 2 of the Kyoto Protocol is to promote
sustainable development.

Applies to all categories of projects. Project contribution to sustainable
development is a stated purpose of Article 12.

- Capacity-building and technology transfer

Issue for some Annex II countries. Important issue for some Annex I countries.

Major issue. Applies to all categories of projects. Several decisions
of COP3 and COP4 have emphasized this.